HMRC move from the carrot to the stick

The world is getting smaller and the global reach of the tax man continues to stretch further. A powerful weapon in HMRC’s battle to reclaim unpaid tax liabilities on offshore assets has been the Requirement to Correct (RTC).

As discussed in previous newsletters, the RTC legislation was introduced in 2017 to endeavour to collect tax on any offshore income, gains or assets which should previously have been taxed in the UK but had not been.

This was the ‘carrot’ phase in which HMRC gave taxpayers the chance to come forward and reveal any UK tax due on offshore assets and this voluntary disclosure was rewarded with reduced penalties.

That window of opportunity closed on 30 September 2018.

Following this closure, HMRC will continue to actively pursue individuals with undisclosed income and gains deriving from offshore assets.

Since 2016 HMRC has been receiving vast amounts of data on overseas accounts, structures and investments from around the world. More than 100 countries have agreed to share personal financial information and this next phase was timed to coincide with the final date for compliance by these countries, being 30 September 2018.

This will provide HMRC with more financial information than ever before and from 1 October 2018 they will apply unbelievably high penalties to any unpaid tax recovered as a result of the information they receive.

  • Where HMRC views non-disclosure as deliberate, penalties could reach an eyewatering 300% of the tax due.
  • Where HMRC accept any non-disclosure was not deliberate, penalties are set at 200%.
  • With co-operation this can be reduced to 150% if HMRC prompted the disclosure or 100% if the disclosure is voluntary. 

The information shared with HMRC only details the existence of an asset. This misguided approach means it is likely that anyone with overseas assets will hear from HMRC in the next twelve months, if they haven’t already.

Where income and gains arising from these assets have been correctly reported or there was nothing to disclose, for example a noninterest bearing account or a holiday home for personal use only, any enquiry can be closed quickly.

We are encouraging anyone with overseas assets to discuss these with us so that they have certainty over their position.

Please email us pem@pem.co.uk if you have any further questions.

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